Veritas: Glass half full for Spain’s Bankia

A glass is half full or half empty depending on your perspective. Nowhere is that more true than in the world of corporate expectations.

Wednesday’s stock market debut of Bankia, Spain’s biggest savings bank formed after the merger of seven troubled savings institutions, raised €3.1bn. This was clearly below hopes of raising as much as €4bn from the initial public offering (IPO). In a closely watched first trading day, the share price fell sharply before recouping losses to close at €3.75, the IPO’s initial discounted price.

As the conservative daily newspaper El Mundo caustically put it: Bankia salva los muebles or, put another way, the bank held on to the furniture while the building shook.

But the result can be seen as a big achievement. This was not the best of times to be listing one of Spain’s savings banks, an industry that was devastated by the collapse of the country’s housing sector. Bankia has one of the largest property-loan portfolios in the country.

To launch an IPO at this time was a calculated risk. It was also seen by many as a brutal stress test for Spain that would show whether government efforts to reform the banks and reassure markets about the stability of its financial system had borne fruit.

As beaming Bankia chairman Rodrigo Rato, a former Spanish economy minister and head of the International Monetary Fund, noted: “We’ve done it in the middle of a real storm in the market.”

A successful outcome was expected to depend on the bank’s ability to convince its own customers to buy shares and that appears to have been the case with retail investors taking about 60% of the issue.

So a success, if qualified. The glass is half full. Bankia still faces many difficulties, but it was right to push ahead with the IPO. It will not get any easier in months to come.

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